Daily Archives: June 30, 2013

Will the Patent Pirates finally be Plundered?

The patent pirates have been plundering for way too long. And we should all be fed up. Since SI alerted you to the problem way back in 2006, in a post on how The Software Patent Pirates will Plunder Away, inspired by a post by Dave Stephens on the now defunct Procurement Central, which evolved into Stephen’s Business and Technology Nexus (which, unfortunately has not been updated since October 1, 2011, as Mr. Stephens is one of the original Procurement Gurus), not much has changed. Even though Mr. Obama declared war on the patent trolls on September 16, 2011 when he signed the Leahy-Smith America Invents Act into law, the pirates are still trolling the high seas of business in search of easy prey to pillage and loot.

To date, as covered in 2011 in SI’s post on how Patent Pirates are Still Plundering, patent trolls have cost investors over half a trillion dollars over the last 22 years (as reported in CNN Money). Half a Trillion Dollars. Think about that. This puts the Somali Pirates, who have figured out how to steal approximately 10 Billion a year from the shipping industry (according to the LA Times), to shame! (The patent trolls are pillaging almost 3 times as much as the Somali pirates from the safety of their penthouse suites!)

The trolls have to be stopped. They now account for approximately half of the roughly 4,000 patent cases a year in America. That’s 2,000 patent cases that are, for the most part, frivolous and unfairly extortive (as small companies cannot afford a lengthy legal battle and are forced to settle to survive). Fortunately, the Obama administration realizes that and has announced new actions and proposals for patent reform. These proposals, designed to reduce anonymity in patent litigation, improve review at the USPTO, give more protection to downstream users, and improve standards at the International Trade Commission, are definitely a step in the right direction. (SI agrees with the TLF that more is needed, but we’ll get to that later.)

Specifically, the administration is recommending the following legislation:

  • Require patentees and applicants to disclose the “Real Party-in-Interest”
  • Permit judges more discretion in awarding fees to prevailing parties in patent cases, providing district courts with more discretion to award attorney’s fees as a sanction for abusive court filings.
  • Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB).
  • Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use.
  • Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts.
  • Use demand letter transparency to help curb abusive suits, incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public.
  • Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges.

In other words, the proposals are to:

  • Make it public as to who is filing a patent suit,
  • why the suit is being filed,
  • and allow judges to penalize abusive, frivolous, filers with big legal bills.

This is a good start, but it’s not enough. First of all, as per SI’s post on why we need a “loser pays” bill for patent lawsuits, the filer of the frivolous patent should be required to pay a penalty that is at least double the cost of the suit, including the defence’s legal fees, damages, and court costs. (If the penalty won’t hurt, they won’t stop.) Secondly, despite the objection of cash-flush giants like Apple and Microsoft, we have to follow the lead of the EU and New Zealand and abolish software patents. The vast majority are complete and utter bullshit. The one’s that aren’t contain specialized business methods that could be patented separately (just like you can patent unique physical inventions and processes for extracting medicinal compounds from natural plants). (And SI is happy to see that the Technology Liberation Front agrees with this proposal.) Software is just code that encodes algorithms in a machine language that is compiled into a binary instruction set that runs the program. This is essentially a complex mathematical formula, and mathematics, like laws of nature, is NOT supposed to be patentable. And since many of the trolls have armed their arsenal with software patents, this would be the best way to strike back.

For more information on the challenges of taming the trolls, you can start by reviewing the recent report on Patent Assertion and U.S. Innovation from the National Economic Council and the Council of Economic Advisors.